Comparative picture of the Indian

Economy and Fugitive Economic

Offender Act 2018

Submitted by:-

Dishant Singh (11718461, A21, L1704)

 INTRODUCTION
Growth Rate in GDP:
The annual average growth rate in GDP of these developing countries also varied widely during
the period 1980-92. The annual average growth rate of GDP in India was 5.2 per cent during
1980-92 as compared to 9.1 per cent for China, 5.7 per cent for Indonesia, 4.5 per cent for
Pakistan, 4.2 per cent for Egypt, 3.1 per cent for Tanzania, 2.9 per cent for Mali, 2.8 per cent for
Zimbabwe, 2.4 per cent for Somalia, 1.2 per cent for Ethiopia and only 1.1 per cent for South
Africa.

Rate of Inflation:
The developing countries have been experiencing high rate of inflation but these rates of
inflation experienced by these developing countries also varied widely. During 1980-92, India
had experienced an annual average rate of inflation to the extent of 8.5 per cent as against 9.1 per
cent of Bangladesh, 8.4 per cent of Indonesia, 7.1 per cent of Pakistan and 6.5 per cent in China.

But the annual average rate of inflation experienced by the African countries during the same
period was as high as 49.7 per cent in Somalia, 42.8 per cent in Sudan, 25.3 per cent in Tanzania,
19.8 per cent in Nigeria, 14.4 per cent in Zimbabwe, 14.3 per cent in South Africa, 13.2 per cent
in Egypt, 9.3 per cent in Kenya and as low as 3.7 per cent and 2.8 per cent in Mali and Ethiopia
respectively.

Adult Illiteracy:
In respect of Adult illiteracy the condition of the developing countries is also not at all
encouraging. In India, the rate of adult illiteracy in 1990 was 52 per cent as compared to 65 per
cent in both Bangladesh and Pakistan, 76 per cent in Somalia, 73 per cent in Sudan, 68 per cent
in Mali, 58 per cent in Angola, 52 per cent in Egypt, 49 per cent in Nigeria, 36 per cent in Libya,
33 per cent in Zimbabwe and 31 per cent in Kenya.
 ECONOMIC DEVELOPMENT OF INDIA

 India has sustained rapid growth of GDP for most of the last two decades leading to rising per
capita incomes and a reduction in absolute poverty. Per capita incomes (measured in US $) have
doubled in 12 years
 But India has one third of all the people in the world living below the official global poverty line.
It has more poor people than the whole of sub-Saharan Africa
 Per capita income is $1,270, placing India just inside the Middle Income Country category
 India's per capita income is 1/20th that of the UK
 Life expectancy at birth is 65 years and 44% of children under 5 are malnourished. The literacy
rate for the population aged 15 years and above is only 63% compared to a 71% figure for lower
middle income countries.
 Despite a strong attempt to become an open economy, exports of goods and services from India
account for only 15% of GDP although this will rise further in the years ahead
 India runs persistent trade and fiscal deficits and has suffered from high inflation in recent years
 India's growth rate has slowed and high inflation is a constraint on competitiveness and growth.
 Investments by Indian businessmen abroad have overtaken foreign direct investment for the first
time – reflecting a lack of confidence among Indian entrepreneurs about their home economy

Development path

India has followed a different path of development from many other countries. India went more quickly
from agriculture to services that tend to be less tightly regulated than heavy industry. That said there are
some emerging manufacturing giants in the Indian economy.

Supply-side factors supporting Indian growth and development

1. A fast-growing population of working age. There are 700 million Indians under the age of 35 and
the demographics look good for Indian growth in the next twenty years at least. India is India is
experiencing demographic transition that has increased the share of the working-age population
from 58 percent to 64 percent over the last two decades.
2. India has a strong legal system and many English-language speakers – this has been a key to
attracting inward investment from companies such as those specialising in IT out-sourcing.
 3. Wage costs are low in India and India has made strides in recent years in closing some of the
productivity gap between her and other countries at later stages of development.
4. India's economy has successfully developed highly advanced and attractive clusters of businesses
in the technology space – witness the rapid emergence of Bangalore as a hub for global software
businesses. External economies of scale have deepened their competitive advantages in many
related industries.

Growth and Development Limiters for India

Despite optimism for India's prospects for economic growth and development, there are a number of
obstacles which may yet see growth and development falter.

 Poor infrastructure - notably in transport and power networks

 Low productivity and weak human capital. A high % of workers are low-skilled and work in
small businesses
 High inflation and a persistent trade deficit
 Low national savings as a share of GDP, low share of capital investment
 Relatively closed economy - India is a net importer of primary products

Indian Development – An Infrastructure Gap

India is a good case study to use when discussing the problems that persist when a country cannot rely
on adequate critical infrastructure such as roads, railways, power and basic sanitation. India wants to
build $1 trillion worth of infrastructure in the next five years but the government expects the private
sector to fund half of it – this is unlikely! Poor infrastructure hurts the Indian economy in numerous
ways:

1. Causes higher energy costs and irregular energy supplies for nearly every business and
especially India emerging manufacturing sectors – there were huge power black outs in 2012
2. It is more expensive to transport products across the country and it creates delays at ports
hamper export businesses and delays at airports which increases the cost of international
freight.
 3. It makes India less attractive to inward FDI
4. It adds to the cost of living and limits the extent to which millions of India's lowest income
families can escape extreme poverty
5. A creaking infrastructure damages the reputation and potential of India's tourism industry

Despite these growth constraints, India's expansion far exceeds that of the vast majority of developed
nations – to put this into some context, India is delivering 30 years of US economic advance every ten
years!

Relative importance of services in India

 One of the key differences for India contrasted with countries such as China, Japan and
South Korea is that the Indian economy is heavily reliant on service industries especially
in her export sector
 The country has a comparative advantage in many service industries such as business
software.
 One consequence of this structural difference in the economy is that India has not yet seen
the rapid urbanization experienced in other nations; more than 60 per cent Indians still live
in rural areas.
 Productivity growth in Indian agriculture has been fairly low and this has limited the
potential to release people from the land to move into towns and cities and find work in
manufacturing sectors.
 INDIAN ECONOMY (COMPARISON BETWEEN 2014 AND 2019)

The health of the Indian economy is measured on several key parameters like Gross Domestic
Product (GDP) growth, inflation rate, tax-to-GDP ratio, repo rate, and more. All these and
several other parameters show how the economy is performing. While some parameters show the
overall health of the economy, others inform us of the situation at the grassroots level.

Inflation, for example, gives a picture of how articles are priced at any given time. The inflation
rate in the past one year has hovered in the range of 2.50 per cent to 4 per cent. This shows that
the prices of the articles have not gone up significantly in the past year.

Repo rate, controlled by the Reserve Bank of India, impacts borrowers, particularly home
buyers, almost every time there is a change. For six months, or three bi-monthly policy meets,
the RBI has not tinkered with the policy rate.

Such pointers to the health of the economy are also important for the central government to
consider when it prepares its annual Budgets. As Modi 2.0 — the Narendra Modi-led Bharatiya
Janata Party (BJP) government in its second term — presents its first Budget on July 5, not only
will it have considered the key economic metrics for the four preceding quarters but will also set
the tone for the economy in the years to come.

Here, we compare the Indian economy in the lead up to Budget 2019-20 with that at the time of
the NDA government’s first Budget in its first term on a set of important economic metrics.
GDP GROWTH

The rate of India's economic growth (%)

REPO RATE
Key policy rate as decided by RBI in each of its bi-monthly monetary policy review (%)

RETAIL INFLATION

CPI-based inflation rate in each of the months (%)

TAX TO GDP

The Centre's net tax revenue as a proportion of GDP (%)

 GDP RANKED BY COUNTRY 2019

What are the countries with the largest economies in the world? Here is a list of the top ten
countries with the highest GDP:

1. United States (GDP: 21.41 trillion)

2. China (GDP: 15.54 trillion)
3. Japan (GDP: 5.36 trillion)
4. Germany (GDP: 4.42 trillion)
5. India (GDP: 3.16 trillion)
6. France (GDP: 3.06 trillion)
7. United Kingdom (GDP: 3.02 trillion)
8. Italy (GDP: 2.26 trillion)
9. Brazil (GDP: 2.26 trillion)
10. Canada (GDP: 1.91 trillion)

As of 2018, only four countries in the world have a GDP per capita in excess of $100,000. These
are Monaco (the highest at $166,285), Liechtenstein, Luxembourg and Bermuda, all of which are
known for attracting wealthy residents as well as for having very small populations, ranging
from 38,155 (Liechtenstein) to 590,321 (Luxembourg). Conversely, at just
$247, South Sudan has the world's lowest GDP per capita, and many countries, predominantly
in Africa, have a GDP per capita below $1000.

Based on UN and IMF figures, the United States has the largest GDP in the world at $20.4
trillion (IMF) and $18.6 trillion (UN). The second-largest GDP is China's at $14.1 trillion (IMF)
and $11.2 trillion (UN). However, the US has a population of 327 million, while China's
population is the highest in the world – a massive 1.42 billion (although despite the significant
difference, the US also has the third-highest population in the world, behind India in second
place with 1.35 billion.

Japan, Germany and the United Kingdom make up the rest of the top five countries with the
largest GDPs at $5,167,050, $4,211,640 and $2,936,290 trillion (US$), respectively (based on
IMF figures). Many island nations feature on the list of countries with the lowest GDPs. The
British Commonwealth nation of Tuvalu is the lowest with a GDP of US$43 million, followed
by the Micronesian island of Nauru at $114 million and the Marshall Islands at $205 million. Not
surprisingly, these islands also have small populations and correspondingly low GDP per capita
figures, ranging from $3,810 (Tuvalu) to $10,078 (Nauru).

World GDP

The world GDP is the added total of the gross national income for every country in the world.
Gross national income takes a country’s GDP, adds the value of income from imports, and
subtracts the value of money from exports. The value of gross national income, GNI, differs
from that of GDP because it reflects the impact of domestic and international trade.

When the GNIs of every country in the world are added together, the value of imports and
exports are in balance. The world economy consists of 193 economies, with the United States
being the largest.

As per World Bank estimates, the nominal world GDP in 2017 was $80,683.79 billion. In 2018,
the nominal world GDP was $84,835.46 billion in 2018, and it’s projected to be $88,081.13
billion in 2019. In 2018, the growth rate for the world GDP was 3.6%.

Nominal GDP vs. PPP GDP

To compare GDPs around the world, currencies must be converted so that they’re consistent
across all countries. There are two main systems of common currency conversion: nominal and
PPP. These two approaches to GDP estimation have separate strengths and are generally used for
different reasons.

Nominal GDP is useful for large-scope GDP comparison, either for a country or region, or on an
international scale. The nominal GDP of an area is determined using up-to-date market prices
and shifts according to inflation. By incorporating an area’s inflation rate in the GDP calculation,
nominal GDP can indicate when prices rise in an economy. The rate of price increases in an
economy are also factored into nominal GDP.

The main downfall of nominal GDP is that it doesn’t account for the living standards in a
country - it focuses only on economic growth and performance. Also, generally speaking,
nominal GDP can differ significantly from year to year depending on variations in exchange rate.

PPP stands for purchasing power parity. PPP GDP is used to measure both the economic growth
and living standards in a country, making it a useful tool in global comparisons. The PPP
approach uses exchange rates to convert one country’s currency into the other. Then, using a
consistent amount of money, the quantity of goods and services that may be purchased in the
countries are compared. For example, PPP may compare the cost of a car in France to the cost of
a car in Japan (after using the exchange rate to convert yen to Euros, or vice versa) to analyze the
difference in GDP and cost of living between these nations. PPP GDP stays relatively stable
from year to year and isn’t significantly impacted by shifts in exchange rate.

PPP GDP can be faulted for the fact that it doesn’t incorporate discrepancies in quality between
goods and services in different countries. In general, it’s less exact than nominal GDP and often
hinges on estimates rather than calculations. As such, nominal GDP is typically used to measure
and compare the size of national economies.

Nominal GDP Rankings by Country

According to the International Monetary Fund, these are the highest ranking countries in the
world in nominal GDP:

1. United States (GDP: 20.49 trillion)

2. China (GDP: 13.4 trillion)
3. Japan: (GDP: 4.97 trillion)
4. Germany: (GDP: 4.00 trillion)
5. United Kingdom: (GDP: 2.83 trillion)
6. France: (GDP: 2.78 trillion)
7. India: (GDP: 2.72 trillion)
 8. Italy: (GDP: 2.07 trillion)
9. Brazil: (GDP: 1.87 trillion)
10. Canada: (GDP: 1.71 trillion)

The Largest Economies in the World

The three largest economies in the world as measured by nominal GDP are the United States,
China, and Japan. Economic growth and prosperity are impacted by a wide array of factors,
namely investment in workforce education, production output (as determined by investment in
physical capital), natural resources, and entrepreneurship. The economies of the U.S., China, and
Japan all have a unique combination of these factors that have led to economic growth over time,
as outlined below.

The United States of America

The largest economy in the world is that of the United States. A number of circumstances
contribute to this, namely support for entrepreneurship, gradual population growth, high average
income, low unemployment rates, and high consumer spending. The 2019 nominal GDP for the
United States is $21,482.41 billion.

The United States comes in second in the world when it comes to approximate total value of
natural resources. In 2016, the country had an estimated natural resource value of $45 trillion.
The U.S. is also comes out ahead of every other country in the world when it comes to natural
gas and oil production.

The U.S. is known globally for cultivating a society that supports and encourages
entrepreneurship. Entrepreneurs create job opportunities and boost the size of the workforce, and
an entrepreneurial culture encourages innovation across industries, in turn leading to economic
growth. The United States stimulates entrepreneurship by upholding free, unrestricted markets
and powerful legal protections for intellectual property.
Population growth is a major contributor to the size of the U.S. economy. While the growth of
the U.S. population has slowed in the past decade, immigration and a younger workforce make
for a diverse labor market. This provides a boost to the economy, further attracting immigrants to
the country.

The U.S. also has one of the leading manufacturing industries in the world, coming in second
only to China. This industry employed 12.56 million people in December 2017, a 1.7% increase
from the previous year. The record output of the U.S. industrial sector was in the first quarter of
2018 and came out to $2 trillion.

The U.S. dollar is the most widely used currency for global transactions. It’s used as the primary
currency in several other countries, which is a process called dollarization. The U.S. dollar is
also used at the de facto currency in a number of countries, including Cambodia, Iraq, Aruba,
and the Dominican Republic.

China

China has a steadily and strategically growing economy, with an average growth rate of 9.52%
between 1989 and 2019. While China is the second largest economy when considering nominal
GDP, it’s the largest economy in the world using PPP.

China has approximately $23 trillion in natural resources. 90% of these natural assets are rare
earth metals and coal, giving the country a high potential for energy and oil production.

Worker efficiency is the driving force behind the growth of China’s economy, and this has been
the case ever since the country implemented a drastic economic reform program in 1978.
Between 1979 and 1994, increases in worker productivity were responsible for over 42% of
China’s economic growth.

China’s economic reform program of 1978 emphasized the creation of private and rural
businesses, the easing of state regulations on prices, and investment in workforce education and
industrial output. The program was, by most counts, a large success and resulted in a rise in
average economic growth from approximately 6% pre-reform to 9% post-reform.
Japan

Japan’s economy, the third largest in the world according to nominal GDP calculations, is
market-driven, meaning that businesses, production, and prices shift according to consumer
demand, not governmental action. Japan's economy showed a GDP growth rate of 1.9% in 2017,
1% in 2018, and is estimated at 0.9% in 2019.

Factors contributing to the size of Japan’s economy are their electronic goods industry, which is
the largest in the world, and their automobile industry, which is the third largest in the world.
Japan’s electronics industry is praised for its innovation, which asserts Japan as a global leader in
the field.

Despite its strengths, the Japanese economy faces formidable challenges going forward. The
nation’s population is shrinking and predicted to drop below 100 million from 127 million by
2050. Additionally, the country’s ratio of public debt to GDP is the highest among the world’s
developed nations; in 2017, national debt stood at 236% in comparison with GDP.

Unlike the U.S. and China, Japan isn’t a leader in natural resources. In fact, it comes up short in
natural resources to uphold its rising population and advancing economy. It’s an island country
with a volcanic, hilly landscape, which greatly diminishes the nation’s potential for output of
agricultural products, petroleum, and raw materials.

IMF data from the April 2018 IMF World Economic Outlook database.

UN data from the July 2018 World Development Indicators.

GDP is in trillions of US dollars.

 TABLE COMPARISON WITH OTHER COUNTRIES

GDP Per
Rank Country IMF GDP UN GDP Capita ($) Population

1 United States 21.4 trillion 18.6 trillion 65,063.85 329064.9

2 China 15.5 trillion 11.2 trillion 10,841.04 1433784

3 Japan 5.36 trillion 4.94 trillion 42,268.7 126860.3

4 Germany 4.42 trillion 3.48 trillion 52,885.01 83517.05

5 India 3.16 trillion 2.26 trillion 2,309.125 1366418

6 France 3.06 trillion 2.47 trillion 46,984.23 65129.73

United
7 Kingdom 3.02 trillion 2.65 trillion 44,758.96 67530.17

8 Italy 2.26 trillion 1.86 trillion 37,348.59 60550.08

9 Brazil 2.26 trillion 1.80 trillion 10,693.46 211049.5

10 Canada 1.91 trillion 1.53 trillion 51,015.15 37,411.05

 ABOUT FUGITIVE ECONOMIC OFFENDER ACT 2018

In recent times India has witnessed a number of scams and economic offences which have left an
adverse impact on the Indian economy and also the banking industry. Some prominent of these
have been the IPL Scam having Lalit Modi (former IPL Commissioner) at the center of it, the
Rotomac Scam, but probably the most reported one has been the alleged fraud by owner of the
now defunct Kingfisher Airlines Vijay Vittal Mallya, who has been out of India for quite a while
now in order to evade trail for criminal offences. In an attempt to bring once prominent liquor
baron, who has been earlier declared a "fugitive" by Special PMLA Court in Mumbai, to justice
and grab him by the neck, the Indian Parliament recently enacted The Fugitive Economic
Offenders Act, 2018 which was assented to by the President on 31st July, 2018 and is deemed to
have come into force on 21st April, 2018. The recent turn of events that led to the enactment of
the legislation were a part of headlines not only in India but outside India as well. He is currently
reported in the United Kingdom, where once 'the king of good times' is battling an extradition
proceedings initiated by India to bring back Vijay Mallya to face criminal actions regarding the
unpaid loans of about $1.4 billion that he owes to Indian authorities and creditors. Interestingly,
he has also offered to repay the dues to all the creditors. In September, 2018 the Indian
government had failed to provide any substantial evidence to justify extraditing tycoon Vijay
Mallya from Britain to face fraud charges. On December 10, 2018, the proceedings regarding
extradition of Vijay Mallya, which had been going on for almost a year, concluded in the favour
of India. The United Kingdom's Westminster Magistrates' Court gave a green signal to extradite
Mallya to India to face charges of fraud and economic offences for duping a number of banks of
almost Rs. 9,000 Cr. The Court observed that there was no substance in the argument placed on
behalf of Mallya that the charges and proceedings against him were politically motivated.

Coming to the Act itself, it has a variety of provisions including, but not limited to, declaration of
a "fugitive economic offender" in respect of a person, attachment of the property of such person
and bar over civil claims. The statute defines 'fugitive economic offender' as any individual
against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any
Court in India, who (i) has left India so as to avoid criminal prosecution, or (ii) being abroad,
refuses to return to India to face criminal prosecution. The Act also defines 'benami property' and
assigns it the same meaning as provide under the Prohibition of Benami Property Transactions
Act, 1988. This implies that the FEO Act, 2018 applies to any property which is the subject
matter of a benami transaction and also includes the proceeds from such property. Further it also
covers within its scope the transactions which are in nature of benami transactions under the
Prohibition of Benami Transactions Act, 1988.

Further, upon a bare reading, it appears that Section 5 of the FEO Act, 2018 is similar to Section
5 of the Prevention of Money Laundering Act, 2002. It has been drafted on the same lines and
both these provisions, though occurring in different statutes, provide for the same thing, i.e.
attachment of the property of a person accused of committing the offences prescribed therein by
the Director with the permission of the Special Court. This also displays the intention of the
legislature towards to consolidate the power and grip of the regulatory and adjudicating
authorities over such accused person in order to prevent him from leaving the jurisdiction, or
absconding from the legal bounds of the Indian government. Section 2(n) of the legislation
provides that a 'Special Court' means a Court of Session designated as a Special Court under
Section 43(1) of the Prevention of Money Laundering Act, 2002.

One of the most prominent provision provided under the FEO Act, 2018 is the bar from putting
forward or defending any civil claim once an individual has been declared a fugitive economic
offender by the virtue of Section 12 of the Act by the Special Court. This bar finds application
upon any and all civil claims, including civil proceedings which have no nexus with the offences
in question including but not limited to divorce proceedings, succession petitions, suits relating
to family disputes, consumer complaints etc. The bar so stipulated under the Act is elementally
different from an Order of Moratorium under the Insolvency and Bankruptcy Code, 2016 as
while the latter stipulates the halt on all relevant proceedings for both litigants, the former has the
effect of disabling the FEO from filing or defending any and all civil claims. This provision
necessary implies towards ex-parte proceedings against a company or any individual declared to
be fugitive economic offender. Such a provision puts the individual, or company in an adverse
position as they are barred from defending or maintaining any civil claim which might be
completely different from the proceedings initiated under the FEO Act, 2018. For these reasons,
Section 14 has been questioned by the critics for taking the powers of the State and authorities at
an unnecessary length, leading to denying the fundamental right of access of justice to the
accused person, which has been held to be an integral part of the Right to Liberty under Article
21 of the Constitution, which has been affirmed by the Apex Court in a number of significant
judgments, most landmark being the Maneka Gandhi vs. Union of India. Additionally, the
National Commission to Review the Working of Constitution (NCRWC), in its report, suggested
incorporation of Article 30A in the Constitution, which was as follows:

"30A: Access to Courts and Tribunals and speedy justice

(1) Everyone has a right to have any dispute that can be resolved by the application of law
decided in a fair public hearing before an independent court or, where appropriate, another
independent and impartial tribunal or forum.

(2) The right to access to courts shall be deemed to include the right to reasonably speedy and
effective justice in all matters before the courts, tribunals or other fora and the State shall take all
reasonable steps to achieve the said object."

Vijay Mallya is now all set to be extradited and as per the updates the FBI has also requested the
National Investigation Agency in India to join them and complete the formalities. Of course,
Vijay Mallya has, as per the law of the UK, 14 days to appeal against the verdict in the higher
court.
 REFERENCES

 www.mondaq.com/india/x/766734/White+Collar+Crime+Fraud/An+Introduction+To+T
he+Fugitive+Economic+Offenders+Act+2018
 www.toppr.com/guides/business-economics-cs/overview-of-indian-economy/indian-
economy-in-comparison-to-major-economies-of-the-world/
 www.business-standard.com/budget/2019/growth-vs-slowdown
 http://www.economicsdiscussion.net/india/comparison-between-india-and-other-
developing-countries/18985